Valuation Basics
Key Metrics to Know
Before you buy a stock, check its vital signs. Here are the big three numbers that matter.
1. Market Cap (The Price Tag)
Market Capitalization (Market Cap) is what the entire company is worth if you bought every single share.
The Formula
Stock Price × Total Shares
Example
$100 price × 1 Million shares = $100 Million Cap
2. Earnings (The Profit)
EPS (Earnings Per Share)
Total profit divided by the number of shares. It tells you how much profit your one share generated this year.
Why it matters
Stock prices chase earnings. If a company makes more money (higher EPS), the stock price usually goes up.
3. Dividend Yield (The Bonus)
Some companies pay you just for owning the stock. This cash payment is called a Dividend.
Think of Yield as Interest
If a stock costs $100 and pays you $4/year, that's a 4% Yield.
4%
Cash Back